Buying at auction – what to expect for buyers and sellers: In August 2019 many auction houses reported a record breaking month…
Buying and selling at auction can be a change from the normal conveyancing process for both buyers and sellers: here is what to expect.
The date of the auction is the date of exchange of contacts. The contract will state how long you will have from the auction/exchange of contracts to complete, usually 20 – 30 days or earlier by agreement. Always ensure you have funds in place (for a buyer) and you can ensure the property will be vacant of anything, or indeed anyone if applicable, on completion (for sellers).
Rather than just providing the standard pack such as the contract (and/or special conditions at auction), Land Registry title and property information forms (residential or commercial) together with an information pack from the landlord and any management company, you will also be expected in most cases to provide local authority search, drainage and water searches and environmental searches (at a minimum depending on the location of the property). A draft transfer will also usually be needed before exchange of contracts, with the buyer’s details to be entered once the auction is complete
These can take some time to prepare and you will have a good idea through previous correspondence with any landlord and/or management company as to how long they take to reply to things. In all cases, a local authority search takes on average two weeks to be prepared, sometimes a lot longer.
What can I do as a seller?
Always instruct a solicitor as soon as possible when you know you wish to sell, at auction or otherwise. This means the necessary paperwork can be obtained from third parties and you can complete yours as soon as possible. The sooner it is uploaded, the better chance you have of finding a buyer. The more information you provide will increase the interest in the property and the confidence of bidder’s in the auction room.
Remember to ask your solicitor to enter a special condition into the contract to ensure the buyer contributes to your legal costs and search fees. Again, discuss these early so you are reimbursed for some of the costs of selling.
Forward the legal pack to your solicitor as soon as possible before the auction. They can then review and raise any red flags that may affect your choice of buying (or the amount you are willing to pay) prior to the auction. A few hundred pounds spent before the auction could save you several thousand in fees and unexpected expenses after the auction. Remember, the auction is exchange of contracts and you are legally bound to buy the property on the completion date. Ensure you have funds available prior to committing and don’t forget you will need to pay the auctioneer 10% on the day of the auction if you are successful. If possible at least speak to your lender/broker prior to the auction and ideally get a visit scheduled. If you are purchasing with a mortgage, ensure you have at least 80 years left on any lease term.
Always visit the property and make sure no one is living there. If someone is, ensure you have a copy of the tenancy agreement and have taken your solicitor’s advice. Always ensure the lease plan is the same as the auctioneer’s particulars and floor plan. If not, the property may have been altered and required planning permission/building regs and landlord’s consent etc in leasehold properties.
Look out and make sure you are aware of any additional costs incurred by the special conditions of sale. Again, once the hammer has fallen you have exchanged contracts and are bound by any of the special conditions, including search fees, legal fees and, on leasehold properties in particular, outstanding service charge/major works costs/ ground rent/rent charges. These will become your liability if you purchase.
While many bargains can be found, you need to be prepared for any possible complications. Always take legal advice before committing to purchase at auction.
For both buyers and sellers, always ensure you provide and return any documentations soon as possible. Your solicitor will need original signed documents from you between exchange and completion, ensure you will be able to provide the same!
*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*